Karafarin Bank v Dara [2009] EWHC 3265 (Comm)

[2009] EWHC 3265 (Comm)Case No 2007 FOLIO 1434
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 10/12/2009
Before
THE HON MR JUSTICE BLAIR
Between
KARAFARIN BANKClaimantGHOLAM REZA MANSOURY DARADefendant
Mr Jasbir Dhillon (instructed by Gordon Dadds Solicitors) for Claimant for The Defendant was not represented and did not attendHearing Hearing dates: 23 rd November 2009
Judgment
[1]This is a claim by the Claimant Karafarin Bank (the “Bank”) against the Defendant Mr. Gholam Reza Mansoury Dara (“Mr. Dara”) for Iranian Rials 30,981,176,480 brought on thirteen cheques together with damages for late payment of the cheques. The relevant transactions all took place in Iran, but proceedings have been brought in this country because Mr. Dara is now resident in the United Kingdom. Various defences have been raised on the cheques, including whether under Iranian law Mr. Dara is personally liable on them. A question also arises as to whether the English court can award damages for late payment in the case of dishonour of a cheque other than interest under section 57 Bills of Exchange Act 1882. Mr. Dara was represented until a few months ago, and has filed evidence, including expert evidence, but on 16 November 2009 he wrote to the Bank’s solicitors saying that it would be a futile exercise trying to defend the case and waste further court time. He did not attend trial, but the Bank wants a judgment on the substance of the dispute rather than a judgment in default, and so it has adduced its evidence and arguments.

The facts

[2]The facts as I find them to be are as follows. The Bank is a privately owned bank incorporated in Iran which conducts its business through some seventy three branches in Iran. Mr. Dara is a citizen of both the UK and Iran, and in 2001 he helped set up an Iranian company called Morvarid Siah Abzian Private Joint Stock Company (“MSA”). In English, this can be translated as the “Black Pearl Company”, and its business was the farming and export of shrimp. Mr. Dara became the managing director of MSA on 23 November 2002. It seems that the company initially prospered, and won a number of awards.[3]The relationship between MSA, Mr Dara and the Bank is described in the witness statement of Mr. Parviz Aghili Kermani who is managing director of the Bank. He gave oral evidence, and I accept his evidence. (The relationship is also described in Mr. Dara’s witness statement, which I have read, though since he did not attend trial, it cannot carry evidential weight.) Mr. Kermani says that he met Mr. Dara at the Bank’s offices in Tehran in January 2003, and that Mr. Dara and MSA subsequently became clients of the Bank’s Central Branch and its International Department. It seems that between April 2003 and August 2005 quite an extensive banking relationship developed between MSA and the Bank, involving three credit facilities. These grew over time, and as at August 2005, the principal sums outstanding from MSA to the Bank under these facilities were(1) Iranian Rials 2 billion pursuant to what has been called the Rial Facility which was a loan facility,(2) US$612,839.71 pursuant to the Import Facility which covered the import of feed mainly from China, and(3) US$1,985,000 pursuant to the Export Facility which covered letters of credit in respect of international sales.[4]The Bank took security for these facilities in various forms, including promissory notes issued by MSA and the title deeds to certain properties. For the purposes of this action, part of the relevant security was in the form of cheques. Between 16 April 2003 and 16 June 2005, Mr. Dara, on behalf of MSA, drew and signed one cheque on his personal account with the Export Development Bank of Iran (“EDBI”), and twelve cheques on MSA’s account with the Bank, all made payable to the Bank. The total amount of the cheques was Iranian Rials 30,981,176,480. The Bank’s case, which I accept, is that the cheques were provided by Mr. Dara to the Bank in order to secure the repayment of the sums owed to the Bank by MSA. At the time the Cheques were signed by Mr. Dara and provided to the Bank they were undated. I have set out the details of these cheques in the table below.[5]It appears that at some point in 2005, disaster overtook the shrimp business when (according to Mr. Dara’s witness statement) the company’s whole shrimp stock was destroyed by a white spot virus in Boushehr province, which is in the south of Iran. He puts the time as Spring 2005, but Mr. Kermani was not apprised of the situation until November 2005, when he was told that the effect of the virus was such that no more shrimps could be farmed in the region for four years. By that time, Mr. Dara says that he had given a month’s notice of resignation as managing director of MSA on 4 August 2005. He left Iran on 22 September 2005.[6]Between September 2005 and December 2006, the Bank sent written demands to MSA for payment of the outstanding credit facilities. These were not met, and the Bank’s case, which I accept, is that consequently between 18 December 2005 and 1 or 28 March 2007 (the former being the date on the English translation of the last cheque, the latter being the date of presentation of the cheque given by Mr Kermani), as and when payments fell due, an employee of the Bank inserted the date of presentation on the relevant cheque and presented it for payment. The details of the dates the Bank inserted on the cheques are set out in the table below, which is adapted from Schedule 2 of the Particulars of Claim. Each of the Cheques was dishonoured for non-payment. Subsequently, the Bank provided Mr. Dara with notice of dishonour of the cheques by sending certificates of non payment to him at the last known address of MSA. Drawn on MSA’s a/c with Karafarin Bank Cheque number Amount of cheque in Rials Date (Gregorian) inserted by Bank on day of presentation 1 216510 1,780,600,000 18.12.05 2 216511 1,781,000,000 18.12.05 3 408493 2,700,000,000 18.12.05 4 216534 6,920,000,000 18.12.05 5 216509 3,116,050,000 18.12.05 6 216539 5,630,000,000 18.12.05 7 216529 3,118,314,360 18.12.05 8 408491 2,664,000,000 28.12.06 9 (drawn on Mr Dara’s a/c with EDBI) 20/6562938 1,000,000,000 22.01.07 10 329364 6,000,000,000 22.01.07 11 216526 572,084,000 01.02.07 12 408492 888,000,000 06.02.07 13 192002 211,128,120 01.03.07 TOTAL 30,981,176,480[7]There were court proceedings brought in Iran in respect of four of the cheques. These resulted in civil and criminal judgments against Mr. Dara, the criminal judgments reflecting the fact that under the law of Iran the drawer may incur criminal liability in the case of non-payment. Mr Jasbir Dhillon who appeared for the Bank took me through them. On 14 June 2006 in the Tehran General Court, judgment was given against Mr Dara on cheque number 4 in the table, this being a criminal judgment. On 8 July 2006, the Bank obtained criminal and civil judgments from the Tehran General Court in respect of cheques number 5 and 6 in the table. A similar judgment was obtained in respect of cheque number 7 in the table on 23 July 2006. On 29 August 2006, a civil judgment was obtained in respect of cheque number 4 (which had been the subject of the earlier criminal judgment). All these judgments were in default of appearance or defence by Mr. Dara. The Bank was unable to enforce them in Iran (because it was unable to locate any assets of Mr. Dara there) or in England (because Mr. Dara had not submitted to the jurisdiction of the Iranian Court). As a result, on 10 October 2007, the Bank issued these proceedings in England to enforce the cheques.[8]On 30 August 2008, Mr. Dara applied to the Tehran Court to set aside the default judgments (I am told the criminal default judgments) on grounds which reflect his defences in these proceedings, namely that the current representatives and/or directors of MSA are responsible for non-payment of the cheques, that Mr. Dara is no longer responsible for the cheques, and/or that Mr. Dara’s responsibility for the cheques is limited to the extent of his shares in MSA. I am told that on various occasions between December and May 2009, all four criminal judgments were set aside. On 11 May 2009, Mr. Dara applied in the English Court to stay these proceedings relying on the existence of the Iranian default judgments. Teare J dismissed this application on 4 June 2009, his judgment now being reported at [2009] 2 Lloyd’s Rep. 289. In his judgment, Teare J explained why on the particular facts, it was not oppressive for the Bank to have pursued proceedings in two jurisdictions.[9]I am told that at some time in May 2009, Mr. Dara also applied to set aside the civil default judgments given by the Tehran Court. On 25 and 29 August 2009, the Tehran Court gave judgments which dismissed his applications, and confirmed the validity of those judgments under Iranian law. I am told that the Bank is not aware of any appeal by Mr. Dara.

The claim on the cheques

[10]The Bills of Exchange Act 1882 provides in s. 72 its own rules governing the position “where laws conflict”. However, as Mr Dhillon has pointed out, they apply where an instrument “drawn in one country is negotiated, accepted, or payable in another”. In the present case, all matters connected with the cheques took place in one country, namely Iran, the defendant’s liability in these proceedings following not from any transactional connection with this country, but from his domicile here. I think Mr Dhillon is right to say that s. 72 has no application in this case, and in any event, to quote his skeleton argument, “It is common ground that the proper law of the Cheques is Iranian law”.[11]A number of defences are raised in Mr Dara’s defence, and all depend in one way or another on Iranian law. In that regard, he has served an expert report by Dr. Hossein Noei, who was a senior Iranian judge. Mr Dhillon objects that the report does not comply with the mandatory requirements of CPR 35.10(1)-(2) and 35PD.2.3. Combined with Dr. Noei’s non-attendance at the trial (see section 3(1) of the Civil Evidence Act 1972) this means, it is submitted, that the report is not admissible in evidence. On the other hand, Dr. Noei took part in an experts’ meeting with the Bank’s expert, and they produced a joint memorandum dated 27 July 2009. I have in any case read Dr. Noei’s report, though since the Defendant did not call him at the trial, it cannot carry much weight where it differs from the Claimant’s expert evidence. This was given by Dr. A.K. Anvari, who has long experience in the business law field. The defences (under the headings ascribed to them by Mr. Dhillon) and my conclusions on them are as follows.[1]The undated cheques issue[12]Mr. Dara has contended that the cheques were invalid under Iranian law because they were undated when he signed them and they were then dated by the Bank prior to presentation. Although factually correct, it is clear that what happened in that regard was what the parties envisaged would happen. I am satisfied for the reasons explained by Dr. Anvari in paragraphs 1(1) – (6) of his first Opinion that the cheques were not thereby invalidated under Iranian law. He says that Iranian customary law permits creditors to receive undated cheques to secure the repayment of debts and by so doing a drawer of a cheque impliedly authorises the holder of the cheque to date the cheque and present it for payment when necessary. Dr. Noei appears to accept (under question 1 as put to him) that undated cheques in the possession of the holder are valid in Iranian practice.[2]Drawer of cheques issue[13]Mr. Dara has contended that he is not the drawer of the cheques and so is not liable under the Iranian Cheques Act. Viewed from an English law perspective, this contention would on the face of it be correct in relation to all the cheques save number 9 which was drawn on his personal account at EDBI. All the rest were drawn on MSA’s account with the Claimant Bank. In English law, a company director is of course not personally liable on a company cheque (there were exceptions under various statutory provisions if the name of the company appeared incorrectly on the cheque: the provisions of s.349(4) Companies Act 1985 were not repeated in the 2006 Act). However the position appears to be different under Art 19 of the Iranian Cheque Act 2003. This provides (in Dr Anvari’s translation) as follows:
“Where the cheque is drawn by way of representation or the attorney-ship of the account-holder, whether being a natural or juridical person, the drawer and the account-holder shall be jointly liable [for] the payment of the amount of the cheque, and the executive writ and judgment of damages shall be issued against both of them on the basis of their joint liability. Moreover, the signatory of the cheque shall have criminal liability in accordance with the provisions of this Act unless he proves that non-payment was caused by the act of the account-holder, his subsequent attorney or representative. In such a case the one who caused non-payment shall have criminal liability.”
[14]The following exchange took place in the course of Dr Anvari’s oral testimony: MR DHILLON: Dr Anvari, I’m looking at your translation of Article 19. Where it says "the cheque is drawn by way of representation or attorneyship of the account-holder"; do you have that? A. Yes. Q. As I understand it, your opinion here is that the cheques here were drawn by Mr Dara by way of representation or attorneyship of MSA, which is the account-holder in relation to the 12 cheques that were the company cheques. A. Yes, sir. Q. And Article 19 provides that the drawer, in this case Mr Dara, and the account-holder, which is MSA, shall be jointly liable it says "to the payment" but I think you mean "for the payment" of the amount of the cheque. A. Yes, sir. Q. And the executive writ and judgment of damages shall be issued against both of them, meaning the drawer, in this case Mr Dara, and the account-holder, which is MSA. A. Yes, sir. Q. Is this really a summary of Article 19 applied to the facts of this case? A. Yes, sir, it is. In addition, if you look at the paragraph 4.2, you see that the Bylaw [as to] the Enforcement of Official Documents also states that when the cheque is drawn by way of representation or attorneyship of account-holder, the drawer and the account-holder are jointly liable to pay the amount of the cheque, and the executive [writ] shall be issued against both of them on the basis of suretyship. Q. You would say this is a basic concept of Iranian law in relation to cheques? A. Certainly.[15]I accept Dr Anvari’s evidence in this regard. Further, it is to be noted, as Mr Dhillon pointed out, that Dr. Noei’s report does not fully support of Mr. Dara’s pleaded contention. He appears to suggest principally that an undated cheque does not fall within Article 19 of the Cheques Act, without explaining why a distinction should be drawn between a dated and undated cheque in that regard (though it is right to say that other points are taken too). Finally, on 25 and 29 August 2009 the Tehran Court confirmed its earlier judgments, at least so far as they related to civil liability on the cheques. Though the August 2009 judgments do not mention Article 19, one of the confirmed judgments, namely that given on August 29, 2006 in relation to cheque 4, does do so. The judgments of the Tehran Courts do therefore provide further support for the Bank’s arguments as they apply to Mr Dara. In any case, I reject this ground (which seems to me to be the most substantial ground of defence pleaded) on the evidence before me.[3]No longer MSA representative issue[16]Mr. Dara has contended that his liability under the cheques came to an end when he ceased to be managing director of MSA by a month’s notice of resignation as managing director of MSA given on 4 August 2005. All the cheques were dated and presented by the Bank after this date. Dr. Anvari’s evidence is that Mr. Dara’s liability to the Bank on the cheques arises by virtue of his signature and does not depend on the capacity in which he acted at the time of signature or subsequently. In any event, he expresses the opinion that Mr. Dara’s resignation does not affect third parties, including the Bank, because it has not been advertised in the Iranian Official Gazette as required under Iranian law. I see no reason not to accept his evidence in this respect, and do so.[4]15 Day Presentation Issue[17]Mr. Dara has contended that the Bank has lost the right to claim under the cheques because it did not present them within 15 days of him signing them. In the Joint Memorandum of 27 July 2007, Dr. Anvari and Dr. Noei agree that the 15 day time limit for presentation of cheques contained in Article 315 of the Commercial Code of Iran is not applicable in this case because it relates to the endorser of a cheque and not its drawer. This contention goes, therefore.[5]Cheques presented for non-secured debts issue[18]Mr. Dara has contended that there is no liability if the cheques were presented for transactions other than those for which they were intended to be security. Dr. Anvari’s evidence is that in the absence of any contract between the Bank and Mr. Dara which provides otherwise, the Bank was entitled under Article 282 of the Iranian Civil Code to decide which debt any payment is to be applied to. Moreover, the Bank relies on paragraph 8 of its General Rules and Conditions for Current Accounts to the effect that the Bank is entitled to set off against cheques any indebtedness of the account-holder. It appears to me that on the evidence before me, as a matter of Iranian law, the Bank was entitled to apply any sums received by it from Mr. Dara or MSA to discharge the debts owed by MSA/Mr. Dara. Further, it is to be noted that Mr. Dara was ordered by David Steel J on 6 June 2008 to provide particulars of any specific import/export transaction for which he contends the cheques were drawn. I am told that no particulars were provided, and further told that no evidence hs been produced to support the contention that the cheques were presented in order to discharge debts other than those for which they were intended to secure. In my view this ground fails on both Iranian law and on the facts.[6]Notice of dishonour issue[19]It appears to be common ground that notice of dishonour was required to render Mr Dara liable on the cheques. Dr Anvari’s evidence is that it has complied with its obligations under Iranian law in this respect in that(1) the Bank gave Mr. Dara notice of dishonour in respect of each cheque by sending a certificate of non-payment marked for the attention of Mr. Dara to MSA’s last known address on the dates set out in Schedule 3 to the Particulars of Claim,(2) these notices comply with the requirements of Iranian law, and(3) even if the Iranian formalities for protest of the cheques had not been complied with, Mr. Dara is still liable under Iranian law according to Ruling No. 623 dated 11 July 1966 of the Iranian Supreme Court. This appears to hold that (subject to the limitation period not having expired), the holder of the cheque can recover from a person liable on it who has benefited from unjust non-payment. On the prior question as to requisite notice, Dr. Noei expresses the view that the Bank has “no doubt complied with the conditions noted in Article 4 of the Cheque Law against the issuer of the cheque”. Article 4 has to do with the formalities that are required if a cheque is not paid. It stipulates that reasons for refusal to pay must be sent by the bank to the drawer’s last address It is unclear on the basis of Dr. Noei’s report how far this point is in fact in issue, but on the evidence, I am satisfied that due notice of dishonour was given.[7]Amount paid by MSA/cheques exceed MSA debts issue[20]The sums paid by the Bank under the three facilities, together with repayments, are dealt with in the evidence of Mr. Kermani. He confirms that there have been no repayments by MSA or anyone else beyond those stated, and this evidence has not been controverted. The face value of the cheques totalled Iranian Rials 30,981,176,480, which I am told was equivalent to US$3,392,298 based on the exchange rates prevailing at the time the cheques were presented for payment. According to the Bank’s skeleton argument of 18 November 2009, the principal sum owed by MSA to the Bank together with substantial finance charges and late payment fees amount in total to Iranian Rials 53,478,182,890, which was the equivalent to US$5,484,942 as at 11 May 2009 (the date of Mr Kermani’s witness statement). A Schedule containing figures up to the date of the trial (23 November 2009) has been provided to the Court, which shows that the amount of the facilities outstanding including late payment charges is now Iranian Rials 57,196,654,142, which at the exchange rate applicable on 22 November 2009 is US$5,789,135.03. Based on the same exchange rate, the dollar equivalent of the face value of the cheques (Iranian Rials 30,981,176,480) was US$3,135,746.61 as at that date. That would clearly not exceed the debts owed by MSA to the Bank. To that figure however, the Bank seeks to add a substantial sum by way of “liquidated damages”, which according to the Schedule produces figures for the cheques of Iranian Rials 54,817,932,902, or US$5,548,373.78. I will consider next whether such further sums are properly recoverable in respect of the cheques, but in respect of this ground, it is sufficient to say that the evidence is (taking into account repayments) that the amount of the cheques is less than the amount owed by MSA, and that this ground also cannot succeed.

Damages for late payment

[21]The Bank seeks judgment for the US dollar equivalent of the principal sum of the cheques, namely Iranian Rials 30,981,176,480, as at the trial date (23 November 2009), which is US$3,135,746.61 according to Mr. Kermani’s Schedule. In addition, the Bank claims damages for late payment. As indicated above, according to the Schedule the sum of the outstanding principal and damages for late payment from the date of presentation of each cheque to 23 November 2009 amounts to Iranian Rials 54,817,932,902. The Bank seeks judgment on the US dollar equivalent of that sum as at 23 November 2009 which is US$5,548,373.78 according to Mr. Kermani’s Schedule.[22]Mr. Kermani explained in his evidence how that this calculation was made, and this was further explained in a note from Mr. Dhillon of 23 November 2009. The background is that Mr. Dara’s pleaded defence is to the effect that the Bank was not entitled to interest, because the rules concerning riba under the law of Iran restricted the recovery of interest as a matter of public policy. The Bank then amended to plead in the alternative a claim to damages for late payment of the sums due pursuant to Iranian law. It is the alternative claim that has been pursued at trial. Dr. Anvari set out at some length in his report the basis for a claim in respect of late payment of a cheque under Iranian law. He says that this is calculated on the basis of the rate of inflation declared by the Central Bank of Iran. Both experts refer in that respect to Article 522 of the Civil Procedure Code of Iran as approved in 2000. In Dr Anvari’s translation, this provides that, “In the case where the subject matter of the claim is a debt …if the debtor in spite of calling the debt by the creditor refuses to pay that, the court will with the observance of the ratio of annual charge of indicator which will annually by determined by the Central Bank of Islamic Republic of Iran, calculate the debt from due date until the date of actual payment of the debt and pass judgment on it unless the parties agree on another manner”.[23]When the experts met on 23 July 2009, they agreed that “If the Court passes Judgment for the Claimant and decides to apply the measures set out under Iranian Law for late payment damages, the criterions set out in Articles 522 of the Iranian Civil Procedure Code and Ruling of the Assembly For Determination of Exigency of the Regime (Para 9-(3) and 9-(4) of Dr. Anvari’s Report and answer 10 of Dr Noei’s Report) are applicable”. Taking this material together, the position agreed between the parties is that under Iranian law, where there has been a significant change in the Consumer Price Index published by the Central Bank of the Islamic Republic of Iran between the due date and the date of payment, the court may award an additional amount to be paid by the debtor under Article 522 of the Civil Procedure Code. The effect is to protect the value of the claim from inflation.[24]Mr. Kermani produced a copy of the Consumer Price Index published by the Central Bank. His evidence as explained to me by Mr. Dhillon (and which I accept), is that the Bank took the latest monthly consumer price index figure provided by the Central Bank of Iran for September 2009 which was 202.9. (This compares to 100 in 2004, a comparison which gives some idea of supervening inflation.) This figure has been divided by the Central Bank of Iran consumer price index figure for the month in which the relevant cheque was due and presented for payment to produce an individual number “x” for each cheque. This number was used to calculate the compensation due to the Bank for price increases during the period that it has not received payment of the principal sum due under the cheque. The Bank has multiplied the principal amount of each cheque by the relevant number “x” resulting in the figures listed in the “Principal plus liquidated damages as at 23 November 2009 at Central Bank of Iran rates” column in Mr. Kermani’s Schedule. I am satisfied on the evidence before me that this is a proper way of calculating damages for late payment, and that an Iranian Court would make such an award.[25]Section 57 Bills of Exchange Act 1882 deals with the measure of damages against parties to a dishonoured bill, including as in the present case, the drawer of a cheque. It provides that where a bill is dishonoured, the measure of damages, which shall be deemed to be liquidated damages, shall be as follows. The holder may recover from any party liable on the bill(a) the amount of the bill,(b) interest thereon from the time of presentment for payment if the bill is payable on demand, and from the maturity of the bill in any other case, and(c) the expenses of noting, or, when protest is necessary, and the protest has been extended, the expenses of protest. I was initially concerned how this provision squares with the recovery of inflation-related liquidated damages for non-payment of the cheques sought in this claim. The answer however, as Mr Dhillon submitted, is that s. 57(1) “fixes the measure of damages for the dishonour of a bill in the domestic law of the United Kingdom. It is not a rule of the conflict of laws. There is no provision in the Bills of Exchange Act by which the choice of law with regard to the measure of damages recoverable for the breach of a contract contained in a bill of exchange is dealt with expressly” (Dicey, Morris & Collins, The Conflicts of Law (14th edn, 2006), at paras. 33-374 and 5). The editors go on to say that, “It is, however, clear that—whatever may be the principles governing the measure of damages in the conflict of laws in general—the courts classify the measure of damages recoverable under a bill or note as a matter of substantive law. The damages due from a party to a bill or note are determined by the law applicable to his contract.” The law is stated similarly in Chalmers and Guest on Bills of Exchange and Cheques (16th edn, 2005), at para 7-052. Section 57(1), it is stated, “is, however, a rule of English law. … It would appear that the measure of damages recoverable from a party to a bill or note is to be treated as a matter of substantive law and is therefore to be determined by the law which governs that party’s contract on the instrument. If the law which governs that contract is the law of part of the United Kingdom, then the measure of damages will be determined in accordance with section 57. If, on the other hand, the law which governs that contract is the law of some foreign country, section 57 will not apply, and the measure of damages will be determined by that law”.[26]The reference to the “law applicable to his contract” in Dicey and the “law which governs that party’s contract on the instrument” in Chalmers reflects the fact that each signature on a bill creates its own contractual obligations, and these are not necessarily governed by the same law. That complication does not arise in the present case, since the only signature on the cheques was that of the drawer. Furthermore, since the cheques were both issued by the drawer in Iran, and payable in Iran, it is unnecessary to decide whether Iranian law applies as the law of the place of issue (lex loci contractus), which is Chalmers’ preferred analysis, or as the law of the place of payment (lex loci solutionis) which is Dicey’s preferred analysis. It makes no difference on these facts.[27]In the great majority of cases, doubtless, when judgment is obtained in the English court on a bill, note or cheque where the contract in question is governed by a foreign law, the measure of damages for dishonour will be an award of interest appropriate to the currency of the instrument, just as in the case of an instrument governed by domestic law. The present case shows however that there will be instances where interest is not recoverable under the governing law, for example because of rules prohibiting riba under that law. Where the governing law provides instead for damages for late payment on some other basis, such as an index reflecting the rate of inflation, such damages are in principle recoverable from the party liable on the instrument. The factual basis for recovery of such damages having been established in this case, I am satisfied that the Bank is entitled to judgment on the cheques, to include damages for late payment of the cheques calculated on the basis of the rate of inflation declared by the Central Bank of Iran from the due date of the cheques up to judgment. For completeness I should add that different considerations arise as regards the judgment debt, and no submissions have yet been made to me in that regard.